The Northern Ireland Assembly has appointed the Alliance party leader David Ford as the first Justice Minster for Northern Ireland.
Ford will have the power to control policing, the courts and Northern Ireland's prison system.
Northern Ireland's justice and policing powers had been administered in London for the last 38 years.
"This is, I believe, a significant day for Northern Ireland," said Ford.
“It is a step forward in the peace process, in the political process, and in ensuring that the institutions which have been in place since 1998 are firmly affixed and are playing their part in serving the needs for the people of Northern Ireland.”
The Alliance party is a neutral party that has neither Nationalist nor Unionist allegiances and it boasts members from both Catholic and Protestant communities.
Ford will oversee a staff of 4,500 people with a yearly budget of $2.2billion.
Ford stressed that politicians would have to work together to achieve an everlasting peace, and he also condemned the Real IRA bomb on MI5 headquarters on Monday morning.
Ireland's Minister for Foreign Affairs Michael Martin welcomed Fords appointment and condemned the Real IRA's attempt to destabilize the Northern peace process.
“Authority and responsibility for policing and justice issues is where they ought to be: at local level, accountable to, and operating for the benefit of all the people of Northern Ireland.
“Today’s decision offers an opportunity to further consolidate and develop the achievements of the peace process.
"Those behind last night’s bomb in Hollywood, Co Down, should take note that the political process continues to move ahead. We stand firm, for peace and democracy. Today’s appointment of David Ford as Minister of Justice confirms our collective resolve,” said Martin.
Sinn Fein leader Gerry Adams welcomed the devolution of policing and justice.
"Today’s the day we were told would never happen. There was great opposition from the unionist parties. And the SDLP threw in the towel on policing legislation almost 10 years ago in 2001.
“We have delivered an increased policing and justice budget and a whole raft of new legislation. We have secured the transfer of policing and justice powers; and won the support of most of the other parties.
“So this is yet another important step forward in the ongoing process of change. The peace process is being challenged but the peace process is working."
Irish Prime Minister Brian Cowen condemned the Real IRA's "very futile act" and said they were "criminals" with "mad ideas."
Ford and his Justice department will implement a series of "shared future" policies and will oversee community safety and public access to justice.
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